AFTER a decade presiding over an untempered building boom Manchester City Council is having to come up with some radical ideas to both free up the market and get new homes built.
Manchester’s strength has always been its ability to put the pieces of a jigsaw together.
Agents have been warning for some time that the city centre would run out of stock in 2012 and it seems to have come to pass with reports of unseemly bidding wars for unseen rentals and a lack of anything half decent at the affordable end of the market.
According to population and growth calculations Manchester needs 1,000 new properties a year, every year, for the next ten years to cope with continued demand and Greater Manchester as a whole probably needs 10,000 new homes a year.
Last year only 3,000 were built.
Now it seems that the city is going back to basics and wants to build council houses again. Good news.
They have the land, they have access to investment via the Greater Manchester Pension Fund, now they just need to find a developer and the right property manager and the people get new homes to rent or buy.
They have already earmarked five sites, two in Brooklands, and the others in Chorlton, Ardwick and next to the Monastery in Gorton that together will provide 244 new properties, 71 for sale and 173 to rent.
While that won’t make a huge dent in the 10,000 target this joint venture build is a pioneer pilot project and the city leaders hope that if other investment institutions can see that the land/finance/build/return model can work then much larger funds will want to get involved.
It’s another way of circumventing the banks, of raising finance by reducing risk. Manchester’s strength has always been its ability to put the pieces of a jigsaw together.
Director of Housing Paul Beardmore said: “What we want to demonstrate is that institutional investment in house building can make a return and help bring forward viable schemes.
“We would want others to follow our lead.”
It seems simple but is apparently legally complex and nothing is likely to happen this year and the crucial bit, the corner piece, will be procuring the housebuilder.
In the meantime Manchester is also looking to follow other authorities, and indeed the Government, to provide indemnity backed mortgages for people struggling to buy their first home. The mortgages are underwritten which allow buyers to put down only a 5% deposit and get a 75% mortgage with the rest covered by the authority.
Both Liverpool and Oldham hope to launch theirs this spring with both schemes targeted at re-sale properties only.
Manchester would follow the Government in offering their mortgages to people looking to buy a new build home.
The city is working with the Co-operative Bank and the Manchester Building Society on the detail and there should be further announcements before summer.
But do young people want to be the saviours of the property market?
In a recent regional review, respected agents Jones Lang La Salle said young people were questioning the home ownership dream and that the balance between home ownership and rental would soon flip with more people renting than buying. Whether that is down to lack of desire or lack of cash is not clear.
Paul Beardmore said: “We do not want to push people into home ownership but national research shows that people still aspire to own their own homes.
“We are aware that for some people renting is the preferred option but we want to make sure people have a choice.”
But what about the argument that house prices are still too high in relation to earnings and that propping up the mortgage market and bank rolling new builds is only preventing prices falling to more affordable levels.
He said: “There is a line of thought that the market should be left alone but what we are seeing is that house prices are not falling and remain particularly high in relation to household income.
“By not doing anything we are not going to help that situation.
“I do not think that the supply level we are talking about will have a significant influence on house prices. Even if we achieve 10,000 new homes across Greater Manchester.
“But an on-going lack of supply will not only mean less choice but more demand for the properties available which will in turn inflate prices.”
You can read the full details of the report here.
The sad thing is though that there are already plenty of properties around that many first timers could afford but are deemed to be in the wrong location.
Friendship Avenue, BridgfordsBridgfords currently have for sale a rather sweet two bedroomed end terrace with upstairs bathroom, gardens front and back and the potential for a garage on Friendship Avenue in Gorton. It’s on a nice street, has even got gas central heating and double glazing and is for sale for £50,000.
A 20% deposit of £10,000 would leave a mortgage of £40,000 which at 4.5% would cost £472 a month on a repayment deal.
But it's far more likely to be snapped up by an investor than a first time buyer.
Neil Fletcher from independent agents Kaye Mackenzie said: “There is a shortage of first time buyers in Gorton. Even a 10% deposit of £5,000 or £6,000 is too much.
“In the boom time young people bought with no deposit but that’s just not an option now and probably why prices here have been hit hard.
“Properties that would have been £90,000 are now half that in some cases, right back down to 2004 prices so a lot of people find they are in negative equity and feel trapped.
“It is an interesting time at the moment. Levenshulme, Longsight and Gorton offer some of the best value property in south Manchester," continues Fletcher, "but sales are struggling and it is the landlords who are benefitting.
“But without investors there would be no market and you do need them because people need to have somewhere to live.”
